Welcome to the EV subsidy.
The New Zealand government has surprised and delighted electric vehicle advocates by announcing significant direct subsidies for electric vehicles – both all-electric and plug-in hybrid, whether new or used but newly imported) of up to $8625. These take effect in just a few weeks time, on 1 July 2021.
From 2022 they will be replaced by a revenue-neutral ‘feebate’, in which higher-emitting vehicles pay a fee, and lower emitting vehicles (including some petrol cars) receive a rebate. That year fuel efficiency standards also come into effect, with fines for noncompliance applying to vehicle importers from 2023. Taken together, these three steps bring New Zealand firmly and finally into line with most other developed countries, where fees, subsidies, and efficiency standards are the norm.
Ināia tonu nei: The time is now
Now we’ll find out if EV sales will start to increase significantly from their currently puny levels. We’ll find out if the charge that the taxpayer is subsidizing rich suburbanites’ consumption will stick. We’ll find out if more EVs means less power for the fossil fuel industry. In the meantime, winning the support of the car industry and of drivers’ advocates (the AA called the plan “well-balanced and positive” with a “good mix of carrot and stick”) is no small feat.
Carbon price: necessary, but not sufficient
The Climate Change Commission, in their advice to Government released on 10 June, were very clear that existing tools to address emissions are far from adequate. In particular, the market-based Emissions Trading Scheme (ETS), even with a rising price on carbon and a falling but flexible cap on emissions, cannot do the job on its own. Their landmark report discusses a whole smorgasbord of market failures (such as split incentives, bounded rationality, and infrastructure lock-in), all of which of have arguably been preventing climate action so far, and all of which are addressed by the new vehicle package.
For example, the benefits of an EV subsidy don’t fall mainly on the car buyer. The benefits arise collectively from starting the decarbonisation of the entire transport system, from building networks of suppliers and supporters, and from beginning the delegitimisation of burning petrol.
Yes, it would be more environmentally sound to rapidly ramp up the cost of all unsustainable consumption, especially of cars and petrol; to stop all new road construction; and to divert the lion’s share of transport funding towards walking, cycling, and public transport. It would also have massive side effects and be politically completely impossible from our current starting point.
While the ETS retains a central role – the Commission advises raising the carbon price from its present $20-$50 range to $30-$70 immediately, and to $50-$150 by 2030) – its actual operation under the Zero Carbon Act remains to be tested. While the international evidence is that a mixed approach of carbon pricing and regulation has worked so far, for the far more sweeping changes needed in the years ahead we are in uncharted waters.
To sketch just one possible outcome of an “ETS only” approach, a sharp rise in the carbon price could result in excessive tree planting and damage to industry, while still not having any noticeable effect on suburban drivers. (Even $100/tonne would only add an extra 12c/litre to the price of petrol.)
The Climate Change Commission is just the kind of institution we need more of to safeguard the future
The Climate Change Commission, through its establishment in 2019 under the Zero Carbon Act in 2019, its formation, its draft report, its extensive community engagement resulting in more than 15,000 submissions, and now its first package of official advice (engaging in detail with the public’s arguments and evidence), is amply fulfilling early hopes of depoliticising climate and fixing the areas of debate.
That’s not to say that carrying out the advice will be easy. A common thread running through the 400 page report is the almost complete lack of planning up to this point. The Commission recommends that the government develop national strategies to decarbonise the energy system; for the bioeconomy; for a circular economy; for an equitable transition; for industry transition; for low-emission freight, for hard-to-abate industries; for waste; for buildings and urban form; and for an equitable transition for Iwi/Māori and the Māori economy.
This “planning” is not central planning. Communities, Iwi/Māori, and industry are all expected to take part. But a failure to plan at all can lead to trouble, one current example being electricity shortages that have led to price spikes and an increase in coal burning. This could have easily been avoided if we had had even slightly more direction on climate change just five years ago.
An example of what long-term strategies might look like is found in Hīkina te Kohupara – Kia mauri ora ai te iwi: Transport Emissions: Pathways to Net Zero by 2050, a May 2021 green paper from the Ministry of Transport, now out for consultation. One pathway, the only one that achieves a 47% cut in transport emissions by 2035, as suggested by the Climate Change Commission, involves significant shifts throughout the transport system. Driving by cars and light trucks falls 39%; public and active transport increases massively (five times as many buses as now, and all of them electric), while total demand for travel decreases. The main tool that reduces driving is “distance pricing”.
Let’s hop on that pathway, sure, but let’s bring everyone else on board too. And if you know a better way, tell me.
We now know the first three carbon budgets (probably)
The Commission’s carbon budgets have been the focus of attention, for the government is very likely to adopt them. Gross CO2 emissions, mostly from fossil fuels, are to fall from 37.5 Mt a year in 2019 to 27.5 Mt by 2030. In addition, tree planting – which largely stopped fifteen years ago – starts expanding again, so that net emissions of long-lived gases fall 38% over 2019–2030. The scope of the changes suggested in the detailed plan give some idea of how challenging this will be. The Commission argue that this, in fact, the most that is practical and achievable.
Are we meeting the Paris Agreement?
The question of the country’s Nationally Determined Contribution (NDC), which the Minister of Climate Change James Shaw punted to the Commission, has been passed right back again like a game of hot potato. There are two difficulties. One is that the Commission has already found the biggest domestic emission cuts it thinks it can; anything on top must come from overseas. That will be expensive, and there are no rules yet or how these “internationally transferred mitigation outcomes” will be conducted. It was on the agenda at COP25 in Madrid, it will be on the agenda at COP26 in Glasgow. It’s a famously difficult issue. Most developed countries aren’t using them, but many developing nations would love it.
Secondly, the entire basis for the NDC stems from the requirements to balance equality, responsibility, and need. For New Zealand, that points towards much higher ambition that at present. The Commission found that the precise level of the NDC involves political, social, and ethical considerations that could only be determined by the government. Still, they did advise that the NDC should involve “much more than” 8 Mt CO2e a year of international mitigation (10% of current gross emissions), at a cost of many billions of dollars per decade. Over to you, Minister.
And to any ute drivers out there worried about price rises: I’m reliably informed that modern utes are built to last forever. If a ute really is the best vehicle for the job, just keep driving it a while longer.